BABA Q1 Earnings Miss Estimates, Revenues Increase Y/Y, Shares Rise

Alibaba BABA reported non-GAAP earnings of $2.06 per ADS in the first quarter of fiscal 2026, which lagged the Zacks Consensus Estimate by 3.29%. In domestic currency, the company reported earnings of RMB 14.75, down 10% year over year.

It posted first-quarter fiscal 2026 revenues of $34.6 billion. The top line beat the Zacks Consensus Estimate by 0.9%. In domestic currency, revenues of RMB 247.7 billion increased 2% year over year. Excluding disposed businesses of Sun Art and Intime, revenues increased 10% on a like-for-like basis.

The revenue growth was driven by strong performance in Cloud Intelligence Group and continued expansion of the domestic e-commerce platform, while strategic investments in quick commerce pressured margins. The company is focusing on two strategic pillars: consumption and AI + Cloud.

Following the release, BABA shares rose 6.76% in the pre-market trading. Year to date, BABA shares have jumped 59.2%, significantly outperforming the Zacks Retail and Wholesale sector’s 10.4% return over the same period.

BABA’s earnings beat the Zacks Consensus Estimate once and missed in the remaining three, the surprise being 0.97%, on average.

Alibaba Group Holding Limited Price, Consensus and EPS Surprise

Alibaba Group Holding Limited price-consensus-eps-surprise-chart | Alibaba Group Holding Limited Quote

Revenues by Segments

Alibaba China E-commerce Group (56.6% of total revenues): Alibaba generated RMB 140.1 billion ($19.6 billion) of revenues from the segment, which increased 10% from the year-ago quarter. Customer management revenues grew 10% year over year to RMB 89.3 billion ($12.5 billion), driven primarily by improved take rates supported by software service fees and growing adoption of Quanzhantui, Alibaba's AI-powered comprehensive marketing solution.

The number of 88VIP members, BABA's highest-spending consumer group, continued to increase year over year in double digits, surpassing 53 million in the quarter. The company continues to enhance the 88VIP membership program with attractive benefits and premium services.

E-commerce Business (84.7% of China E-commerce revenues): The core e-commerce vertical generated revenues of RMB 118.6 billion ($16.6 billion), reflecting a 9% increase from the year-ago quarter. 

Quick Commerce (10.5% of China E-commerce revenues): The quick commerce business generated revenues RMB 14.8 billion ($2.1 billion), which grew 12% year over year. This growth was driven by the rollout of "Taobao Instant Commerce," launched in April 2025, contributing to user engagement and order volume growth.

China Commerce Wholesale (4.8% of China E-commerce revenues): The wholesale business generated revenues of RMB 6.7 billion ($937 million), which grew 13% year over year, attributed to increasing revenues from value-added services provided to paying members.

Alibaba International Digital Commerce Group (14.0% of total revenues): The segment comprises AliExpress, Trendyol, Lazada and other international businesses. BABA generated RMB 34.7 billion ($4.9 billion) in revenues from the segment, which grew 19% from the year-ago quarter, primarily driven by strong cross-border business performance.

International Commerce Retail (81.8% of international revenues): Revenues were RMB 28.4 billion ($4.0 billion), up 20% from the year-ago quarter, driven by revenue increases from AliExpress Choice and Trendyol operations.

International Commerce Wholesale (18.2% of international revenues): The business generated revenues of RMB 6.3 billion ($886 million), which increased 13% year over year due to growth in cross-border related value-added services.

Cloud Intelligence Group (13.5% of total revenues): The segment generated revenues of RMB 33.4 billion ($4.7 billion), up 26% from the year-ago quarter. Revenues from external customers grew 26% year over year, primarily driven by accelerated growth in public cloud revenues and rising adoption of AI-related products and services.

AI-related product revenues maintained triple-digit growth for the eighth consecutive quarter, now representing over 20% of revenue from external customers. The strong AI demand is driving increased utilization of compute, storage and other cloud services.

The company continues to advance its AI capabilities with upgraded Qwen3 models, including reasoning models and AI coding solutions that are gaining traction in global markets through open-source initiatives.

All Others (23.6% of total revenues): The segment's revenues were RMB 58.6 billion ($8.2 billion), reflecting a 28% year-over-year decrease. This decline was primarily due to the disposal of Sun Art and Intime businesses, as well as decreased revenue from Cainiao, partly offset by increased revenues from Freshippo, Alibaba Health and Amap.

Operating Details

In the fiscal first quarter, Sales and marketing expenses were RMB 53.2 billion ($7.4 billion), up 62.6% from the year-ago quarter. As a percentage of total revenues, the figure expanded significantly to 21.5% from 13.4% of the year-ago quarter, reflecting heavy investment in "Taobao Instant Commerce" and user acquisition initiatives.

General and administrative expenses were RMB 7.4 billion ($1.0 billion), down 48% from the year-ago quarter. As a percentage of total revenues, the figure contracted to 3.0%, partly due to the absence of one-time provisions from the prior year.

Product development expenses were RMB 15.0 billion ($2.1 billion), up 12% year over year. As a percentage of total revenues, the figure increased to 6.1%, reflecting continued investment in technology and innovation.

Adjusted EBITDA was RMB 45.7 billion ($6.4 billion), down 11% year over year due to strategic investments in quick commerce, partly offset by revenue growth and improved operating efficiencies across various businesses. The adjusted EBITDA margin contracted to 18%, from 21.0% in the prior year..

Balance Sheet & Cash Flow

As of June 30, 2025, cash and cash equivalents were RMB 183.1 billion ($25.6 billion), up from RMB 145.5 billion ($20.3 billion) as of March 31, 2025. Total liquid investments were RMB 585.7 billion ($81.8 billion), including short-term investments and other treasury investments, down from RMB 597.1 billion ($83.4 billion) in the previous quarter.

Alibaba generated RMB 20.7 billion ($2.9 billion) in cash from operations, down from RMB 33.6 billion ($4.7 billion) in the prior quarter, primarily due to increased investments in cloud infrastructure and quick commerce operations.

BABA's free cash flow was an outflow of RMB 18.8 billion ($2.6 billion), compared to an inflow of RMB 17.4 billion ($2.4 billion) in the prior year quarter, mainly attributed to accelerated CapEx investment of RMB 38.7 billion ($5.4 billion) in AI and cloud infrastructure and strategic investment in quick commerce expansion.

Zacks Rank & Stocks to Consider

Alibaba currently carries a Zacks Rank #5 (Strong Sell).

BuildABear Workshop BBW, Bed Bath & Beyond BBBY and Dutch Bros BROS are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector. While BBBY and BROS carry a Zacks Rank #2 (Buy) each, BBW sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

BuildABear Workshop shares have appreciated 32.1% year to date. The Zacks Consensus Estimate for BuildABear Workshop’s fiscal 2026 earnings is pegged at $3.95 per share, up by a penny over the past 30 days, implying growth of 4.77% from the year-ago reported figure.

Bed Bath & Beyond shares have appreciated 82.7% year to date. The Zacks Consensus Estimate for Bed Bath & Beyond’s fiscal 2025 loss is pegged at $1.20 per share, down by 7 cents over the past 30 days.

Dutch Bros shares have appreciated 37.1% year to date. The Zacks Consensus Estimate for Dutch Bros’s 2025 earnings is pegged at 66 cents per share, up by 7 cents over the past 30 days, implying growth of 34.69% from the year-ago reported figure.

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